Baton Rouge, La. - The Louisiana Department of Health (DHH) announced plans for substantial improvements today to the State's Medicaid managed care program called Bayou Health. The anticipated changes will improve budget predictability, provide greater opportunity and incentives for managed care organizations (MCOs) to improve recipient health outcomes, add benefits for Bayou Health recipients, and will streamline coordination between Bayou Health and the State's behavioral health managed care program. These changes will be outlined in new program rules and contracts, anticipated to begin on February 1, 2015.

"Bayou Health has already delivered incredible results through improved health outcomes of Medicaid recipients in Louisiana while saving state taxpayers money," said LDH Secretary Kathy H. Kliebert. "The improvements to Bayou Health in the RFP will build upon our early successes and implement some of our lessons learned. I am so excited to work with the health plans, providers and stakeholders on new ways to improve the health and wellbeing of more than 900,000 Louisiana residents. Together we can become a healthier and stronger Louisiana."

At its inception, LDH anticipated that Bayou Health would save $135.9 million in the program's first full year of implementation. Those savings were achieved, and ongoing savings are validated by a recent comparison of Bayou Health to legacy Medicaid costs, which indicates that one model of managed care saves the State nearly $30 per recipient per month for its members, a greater than 12 percent reduction in costs.

Simplifying the Delivery Model

The largest planned change for Bayou Health is the consolidation of its two models into one risk-bearing MCO model, in which managed care organizations are paid a monthly flat fee for managing the care of Medicaid recipients, reimbursing providers for services and maintaining a robust network of subcontracted providers to ensure benefits for Bayou Health members. One of the greatest lessons learned in the first three years of Bayou Health was that prepaid health plans increased budget predictability for the State and taxpayers while allowing the needed flexibility for health plans to deliver care tailored to the needs of the recipient. Shared savings plans, plans in which a smaller management fee is paid in addition to the old fee-for-service style of claims payment, would no longer be a part of Bayou Health.

The Department also proposes incorporating the best practices it learned from shared-savings plans. Taken from the shared-savings model, MCOs will be incentivized to more directly engage health care providers to find more ways to improve health outcomes making Bayou Health recipients healthier and saving Louisiana money.

An analysis conducted by the Department with the support of its actuary firm found that prepaid plans saved the State nearly $13 per recipient per month on average over shared-savings plans. A summary of the cost comparison may be found here. While that difference may be small in terms of each individual recipient, with nearly 1 million Bayou Health members, transitioning to a complete system of prepaid plans will save Louisiana millions of dollars.

Improving Health Outcomes

Another series of proposed changes will allow faster access to care coordination for new Medicaid enrollees and establishes new quality benchmarks for health plans tied to financial rewards that are intended to lead to further improvements in the health of Bayou Health recipients.

Under anticipated rule changes through a Notice of Intent, new Medicaid applicants will be able to choose a health plan during their application process or will be immediately auto-assigned to one if they did not choose. Historically, new Medicaid recipients were enrolled in fee-for-service Medicaid and-provided an opportunity after Medicaid enrollment during which they could select a health plan or be auto-enrolled during the time prior to enrollment-often two months or more-they were not receiving the benefits of care coordination and, claims were paid in the legacy fee-for-service model. Under these revised rules, care coordination would begin immediately upon enrollment into Medicaid This change also reduces costs for processing claims in the fee-for-service model.

Improved Benefits & Expanded Populations

Under the proposed new requirements for MCOs will be a requirement for each to develop a common Bayou Health pharmaceutical formulary within six months of the contract start date - a change that will reduce administrative complexity for Bayou Health providers statewide while improving continuity of care for plan members. Currently, each health plan manages its own formulary, meaning the same brands of drugs are not always covered by all plans.

Proposes rule changes also include new benefits for Bayou Health including:

  • Hospice care and services,
  • In-home personal care assistance for children under 21 years of age, and
  • Non-emergency medical transportation for all services, including dental appointments and behavioral health care.

The revised rule would also allow the voluntary opt-in for some populations not previously covered, including:

  • Recipients of 1915(c) home and community based waivers for acute care services
  • Children ages 3 through 21on a waiting list for home and community-based services, and
  • Members who choose to begin receiving hospice care (previously individuals in need of hospice care were moved back into the legacy Medicaid program).

Improved Coordination between Bayou Health and the Louisiana Behavioral Health Partnership

LDH is also working to improve the overall coordination between the health plans in Bayou Health and the Louisiana Behavioral Health Partnership to simplify billing and payment for services and prescription medications. LDH anticipates that it will require health plans under new Bayou Health contracts to employ a Louisiana-licensed psychiatrist to assist with behavioral health care coordination for their members.

The Department would also clarify that medications prescribed by a behavioral health provider shall be the financial responsibility of the behavioral health plan. Bayou Health plans will be responsible for arranging and providing non-emergency medical transportation for members for appointments with all provider types, including the still carved out dental and behavioral health care services. Getting to and from important medical appointments will be easier for Bayou Health members under this consolidation of transportation services, which increases the chances they will be able to attend scheduled medical appointments that they might otherwise miss.

More Performance and Financial Quality Benchmarks

In the next round of Bayou Health contracts, LDH intends for health plans to be measured against 20 new performance metrics in addition to the 25 existing performance and 10 administrative measures. These measures will ensure that health plans are held accountable for the care they provide to recipients and how they work with providers and hospitals across the state.

Current plans include a total of eight quality metrics to which financial rewards are tied. Six of these metrics are new; two are a continuation from the current round of Bayou Health contracts. Tying financial incentives to the selected quality measures encourage health plans to prioritize services for their members that will ultimately impact Louisiana's population health outcomes.

LDH also anticipates making several other changes, including improved member communication, administrative changes, participation of the State's actuary in the proposal evaluation and scoring, and additional refinement of the expectations for Patient Centered Medical Homes.

Maintaining Key Components

LDH is committed to ensuring that next phase of Bayou Health keeps many of the same critical components that created a stronger Medicaid program for Louisiana residents, including:

  • Medical loss ratio of 85% to ensure that dollars are spent on health care services
  • Absolute rate floors for most providers,
  • Competitive procurement to ensure a limited number of the best qualified plans are selected
  • Prompt payment rules to ensure timely claim payments, and
  • Grievance and appeals process for both providers and members.


The RFP for the new contract is currently under review by the Division of Administration (DOA). LDH anticipates that it will be released on July 28 with the deadline for proposals on Sept. 26. There will be two rounds of questions and answers (the second for follow up on the Department's written responses) for any interested entity to provide feedback or ask questions regarding the RFP during this time. Revised rules for Bayou Health are scheduled to be published in the August 20, 2014 Louisiana Register, which will commence a public input process. New contracts for Bayou Health are set for implementation on Feb. 1, 2015.

The Louisiana Department of Health strives to protect and promote health statewide and to ensure access to medical, preventive and rehabilitative services for all state citizens. To learn more about LDH, visit For up-to-date health information, news and emergency updates, follow DHH's Twitter account and Facebook.